Precipitous Decline in FDI in Last Two Years of Modi’s Tenure

The last two years of Modi’s tenure may bring in the lowest FDI. The government is trying its best to build a narrative projecting India is the fastest-growing economy post-COVID. But the reality is that there is a general decline in FDI flows globally, and India is not bucking the trend.

A lot of hype has been generated to attract FDI in chip manufacturing, with the government offering nearly $10 billion of direct subsidy to the Vedanta-Foxconn combine. This was launched by the PM himself in Gujarat last year. But the joint venture fell apart last week and there is no clarity on how the chip project will be revived. This, and the Micron chip assembly and testing plant announced during the PM’s US visit, are being touted as big potential FDI inflows in this fiscal. But experts in semiconductor manufacturing suggest that such complex foreign technology-led investments will take time to fructify, if at all. Merely throwing large subsidies around is not enough, as the Vedanta-Foxconn experience shows.

Meanwhile, Indian startups are also in a tight corner, as funding dries up and the much-touted  ‘100 unicorns’ narrative is also becoming difficult to sustain. They are all drastically restructuring their business models, moving away from high burn rates to enforce profitability and unit economics as global liquidity supporting startups dries up. It has not helped that some of the poster boys among unicorns like Byju’s face serious corporate governance problems.

It appears that tech startups will also not attract much M&A-linked FDI this year. Overall, it doesn’t seem like a pretty picture for the Modi government, which is projecting itself as a darling of global investors.

The last two years of Modi’s tenure may bring in the lowest FDI. The government is trying its best to build a narrative projecting India is the fastest-growing economy post-COVID. But the reality is that there is a general decline in FDI flows globally, and India is not bucking the trend.

A lot of hype has been generated to attract FDI in chip manufacturing, with the government offering nearly $10 billion of direct subsidy to the Vedanta-Foxconn combine. This was launched by the PM himself in Gujarat last year. But the joint venture fell apart last week and there is no clarity on how the chip project will be revived. This, and the Micron chip assembly and testing plant announced during the PM’s US visit, are being touted as big potential FDI inflows in this fiscal. But experts in semiconductor manufacturing suggest that such complex foreign technology-led investments will take time to fructify, if at all. Merely throwing large subsidies around is not enough, as the Vedanta-Foxconn experience shows.

Meanwhile, Indian startups are also in a tight corner, as funding dries up and the much-touted  ‘100 unicorns’ narrative is also becoming difficult to sustain. They are all drastically restructuring their business models, moving away from high burn rates to enforce profitability and unit economics as global liquidity supporting startups dries up. It has not helped that some of the poster boys among unicorns like Byju’s face serious corporate governance problems.

It appears that tech startups will also not attract much M&A-linked FDI this year. Overall, it doesn’t seem like a pretty picture for the Modi government, which is projecting itself as a darling of global investors.

The last two years of Modi’s tenure may bring in the lowest FDI. The government is trying its best to build a narrative projecting India is the fastest-growing economy post-COVID. But the reality is that there is a general decline in FDI flows globally, and India is not bucking the trend.

A lot of hype has been generated to attract FDI in chip manufacturing, with the government offering nearly $10 billion of direct subsidy to the Vedanta-Foxconn combine. This was launched by the PM himself in Gujarat last year. But the joint venture fell apart last week and there is no clarity on how the chip project will be revived. This, and the Micron chip assembly and testing plant announced during the PM’s US visit, are being touted as big potential FDI inflows in this fiscal. But experts in semiconductor manufacturing suggest that such complex foreign technology-led investments will take time to fructify, if at all. Merely throwing large subsidies around is not enough, as the Vedanta-Foxconn experience shows.

Meanwhile, Indian startups are also in a tight corner, as funding dries up and the much-touted  ‘100 unicorns’ narrative is also becoming difficult to sustain. They are all drastically restructuring their business models, moving away from high burn rates to enforce profitability and unit economics as global liquidity supporting startups dries up. It has not helped that some of the poster boys among unicorns like Byju’s face serious corporate governance problems.

It appears that tech startups will also not attract much M&A-linked FDI this year. Overall, it doesn’t seem like a pretty picture for the Modi government, which is projecting itself as a darling of global investors.